Asian shares fall as US yields hold near four-month high

A visitor using his smartphone takes photos of an electronic screen displaying Japan’s Nikkei share average, which surged past an all-time record high scaled in December 1989, inside a building in Tokyo, Japan Feb 22, 2024. REUTERS/Issei Kato/File Photo

SYDNEY — Asian shares tracked Wall Street lower on Wednesday as U.S. yields stood near four-month highs, while a powerful earthquake in the region raised concerns about possible disruptions to the vital chip-making industry.

Europe is set for a subdued open, with EUROSTOXX 50 futures little changed and FTSE futures easing 0.3 percent. Wall Street stock futures were off 0.2 percent as investors pondered the risk of fewer rate cuts ahead of an appearance from Federal Reserve Chair Jerome Powell and U.S. services and jobs figures due later in the day.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.7 percent. Japan’s Nikkei dropped 0.8 percent, after a 20-percent blockbuster rally in the first quarter.

Taiwan’s shares skidded 0.5 percent after a 7.2 magnitude earthquake rocked the island, collapsing buildings, killing at least four people and injuring dozens.

Taiwan makes up about 90 percent of chipmaker TSMC’s production. The group’s shares fell 0.9 percent after it said some facilities were evacuated following the quake. It later said evacuated employees were beginning to return to work.

READ: China shares jump, Japan tumbles

China’s blue chips eased 0.2 percent while Hong Kong’s Hang Seng index fell 0.8 percent, even as a private sector survey showed the expansion in the services industry picked up pace in March.

On Wall Street, a recent run of solid U.S. economic data – including an unexpected expansion in the manufacturing sector and the slow easing in the labour market – has stoked doubts about the amount of the Fed easing likely this year and next.

READ: Fed officials see three rate cuts ‘reasonable’ this year

A pair of Fed policymakers on Tuesday both said they think it would be “reasonable” to cut U.S. interest rates three times this year, but markets only see about 69 basis points in easing.

“At this last meeting, they still indicate three times, but these movements tend to have some momentum. As they start to shift, you find that they will probably shift again next meeting and then by next meeting, they probably will be indicating that they’re going to cut only twice,” said Andrew Lilley, chief rates strategist at Barrenjoey in Sydney.

“And there’s a very high chance of one in three that they don’t ease at all.”

Euro zone inflation

The three major Wall Street indexes fell about 0.7 percent-1 percent. Tesla shares lost about 5 percent after quarterly deliveries fell for the first time in nearly four years.

READ: Indexes end lower as Tesla drops, rate cut timing weighed

Long-term Treasury yields climbed to multi-month highs overnight before paring some of the movements. The benchmark 10-year yield was steady at 4.3572 percent on Wednesday, after hitting a four-month high of 4.405 percent overnight.

Investors now await euro zone inflation data, which could surprise on the downside after German inflation eased more than expected. In the U.S., a private payrolls report and a services sector survey are the key data risks, along with a speech from Fed Chair Jerome Powell on the economic outlook.

In currency markets, the dollar failed to get a lift from higher yields but still loomed large against its major peers. The yen was jittery at 151.57 per dollar, just a whisker away from the 152 level that prompted authorities to intervene in late 2022.

Oil held near five-month highs on worries about tighter supplies ahead of an OPEC+ meeting where the group is unlikely to change output policy. Brent  rose 0.1 percent to $89.00 a barrel, while U.S. crude was little changed at $85.15 per barrel.

Gold prices extended their record rally on Wednesday. Spot gold rose 0.1 percent to $2,282.58 per ounce, after hitting an all-time high of $2,288.09 earlier in the session.